Ethiopia’s Sovereignty Illusion: Who Really Pulls the Strings?

Despite talk of reform and resilience, the country’s fate is shaped far beyond its borders.

In 2018, as Ethiopia entered a new chapter with the rise of Prime Minister Abiy Ahmed, he made a striking remark: “A poor country has no sovereignty.” At the time, many dismissed it as a throwaway line. But in hindsight, it was more revealing than we realized. It wasn’t just an observation—it was a warning.

The dominant narrative has long been that Abiy’s ascent was driven by the Oromo youth movement (Qeerroo) and Amhara Fano militias—forces that galvanized enough pressure to shake the foundations of TPLF-led EPRDF rule. It credits the “power of the people” with toppling a powerful elite.

But for those paying closer attention, that version of events feels incomplete.

If the TPLF truly held military and economic dominance—as it did for nearly three decades—why did it relinquish federal power without triggering a full-scale civil war? Ethiopia was fragile. Inflation was rising. The economy had faltered after the death of Meles Zenawi. And the TPLF—whose survival instincts have never been in question—could have plunged the country into chaos to cling to power.

But it didn’t.

Which raises a deeper question: Who—or what—was powerful enough to make the TPLF step aside without setting the whole system ablaze?

External Levers

The answer may not lie in Addis Ababa, Mekelle, or Bahir Dar—but in Washington, Brussels, and the boardrooms of the International Monetary Fund (IMF) and World Bank.

By 2017, Ethiopia was sliding into a debt crisis. Foreign currency reserves were dwindling. Major infrastructure projects were stalling. Government salaries were struggling to keep pace with inflation.

These weren’t just internal setbacks—they signaled that the country had exceeded the limits of its economic sovereignty.

At the same time, pressure from international financial institutions began to mount. To qualify for debt relief or new funding, Ethiopia was told it had to “reform”. And by reform, they meant implement neoliberal structural adjustments: Devalue the birr, float the exchange rate, slash public spending, eliminate subsidies, privatize state enterprises, and boost domestic tax collection.

Sound familiar? It should. These are precisely the policies the government has aggressively pursued since Abiy Ahmed took office.

But let’s be clear: This isn’t about conspiracy—it’s about economic leverage. Despite any good intentions, Ethiopia’s government has limited autonomy. Much of its policy space is defined by what international creditors demand in exchange for survival.

This is simply how the global economic system works. Countries that borrow heavily must accept policy terms set by their creditors. In Ethiopia’s case, this has meant implementing austerity measures that have often deepened public hardship while keeping foreign lenders satisfied.

The 2019 IMF loan and debt restructuring—worth nearly $3 billion—came with strings attached, including strict austerity measures: Devaluing the birr, slashing fuel and electricity subsidies, and privatizing state-owned enterprises.

The deal also required Ethiopia to tighten monetary policy, limit borrowing by state firms, and prioritize debt repayment over social spending—policies that eroded economic sovereignty while fueling inflation and public discontent.

In July 2024, the IMF approved a new four-year $3.4 billion Extended Credit Facility, but the government’s compliance came at a brutal cost. Fuel and electricity subsidies were abruptly axed, the birr was devalued past the point of stability, and, overnight, living expenses spiraled beyond reach. The consequences? A population pushed to the brink, simmering with rage as their economic foundations crumbled.

So once again, we must ask: Who truly holds power in Ethiopia today?

People Power

On paper, the people are the ultimate source of political legitimacy. But how much power do they really have when prices soar, basic services collapse, and the same policies keep moving forward—without their input?

The cost of living in Ethiopia is unbearable. There is no functional middle class anymore—only those who scrape by and those with access to foreign currency. Public servants, once the backbone of national stability, can barely feed their families. Healthcare is collapsing. Education is underfunded. And instead of relief, the people are met with higher taxes, new fees, and lectures about national sacrifice.

This isn’t governance. It’s economic surrender dressed up as reform.

Meanwhile, a government boxed in by debt and international lenders clings to the IMF’s blueprint as if it’s the only way forward. But this path wasn’t designed for Ethiopia’s complex socio-political fabric—it was designed for one purpose: Debt repayment. Period.

Leadership Bound

Prime Minister Abiy came to power with promises of unity, prosperity, and medemer. And to his credit, he inherited a deeply broken system. His hands were tied in more ways than the public fully appreciates.

But even the best of intentions are constrained by structural dependence. Ethiopia’s leadership cannot spend freely, invest strategically, or even delay painful reforms—because the funds that keep the economy afloat come with strings attached.

In this light, Abiy’s 2018 comment—”a poor country has no sovereignty”—is less a slogan than a bitter truth. One he may have come to understand more deeply over time.

Reimagining Sovereignty

So, where does that leave us? Ethiopians must begin to confront this uncomfortable reality: The Prime Minister is not fully in control. The people, while resilient, have been sidelined from decision-making. True economic power lies in institutions outside the country.

Ethiopia’s story doesn’t have to end in managed decline. But regaining autonomy will require bold and imaginative shifts in how the country approaches development and power.

One key step is recalibrating its international partnerships. To reduce dependence on Western lenders, Ethiopia must pivot. Strengthening ties with alternative partners—such as BRICS nations, African regional banks, and South-South trade blocs—could open new funding streams less tethered to neoliberal dogma. The African Continental Free Trade Area also offers the possibility of expanding trade and building resilience from within the continent.

But external alliances alone are not enough. True sovereignty begins at home, with a productive economy. Endless currency devaluation is no substitute for production. Ethiopia must invest in processing its own agricultural outputs, producing basic pharmaceuticals, and developing light manufacturing—sectors that build economic independence and cushion against global shocks.

Equally important is restoring trust between the state and its citizens. Without transparency, reforms will breed resentment rather than resilience. Citizens deserve a voice in how their economy is managed. The backroom deals with international institutions must be brought into the light. Auditing the national debt, identifying illegitimate or odious loans, and building public trust are essential if sovereignty is to mean anything at all.

Encouragingly, Ethiopia is not alone. Others have navigated similar terrain. This is not uncharted territory. In 1997, Malaysia defied IMF prescriptions, imposed capital controls, and recovered faster than its neighbors. Rwanda has pursued a more selective borrowing strategy, ensuring national goals take precedence. Neither path is perfect—but both show that alternatives exist.

Breaking the Spell

Power, as a fictional character once said, “resides where people believe it does”. In Ethiopia today, too many still believe that power rests solely in the hands of the government or the armed groups in conflict.

But real power—the kind that shapes policy, that determines whether a child eats or starves, whether a family can afford healthcare, whether a civil servant retains their dignity—resides elsewhere.

It is held in distant boardrooms, foreign treasuries, and algorithmically generated policy briefs. Unless Ethiopians collectively acknowledge this, confront it, and find new pathways, then sovereignty will remain a fiction.

But fictions can be challenged—and rewritten.

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While this commentary contains the author’s opinions, Ethiopia Insight will correct factual errors.

Main photo: Prime Minister Abiy Ahmed receives a delegation led by IMF chief Kristalina Georgieva, February, 2025. Source: Fana Media Corporation

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